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Avoiding sending 1099`s and W2`s in an online sales platform

Well, I guess this is my first post to the forum, but it seems like everyone who has used the form has had great things to say on the podcast. I will try and simplify my situation as much as possible, but it is kind of complex.

I’m in the process of creating a web platform for selling class notes. In one sense, the platform is like ebay where a student willing to sell their notes are able connect with people who are willing to pay. While we do provide the platform, we differ from ebay in several ways. Only one note taker is allowed per class in a single college, and the students who pay for notes decide who this individual is. The democratic decision is based on posted examples and previous reviews. We also set the price of the notes, and how much money each note taker receives per note buyer. While we are developing a distribution platform, I have several concerns related to accounting:

1. While I am trying to maintain possession of the notes so that students in the future can look at content from the previous year, I am worried that I will have to send W2’s or 1099’s to each student who sells their notes. There are over 4,000 universities in the United States alone; if 10% of these universities embrace my system in 10 classes, I would have to send over 4,000 1099’s and w2’s. How can I avoid having to do this?

2. I am also worried about students who agree to take notes, but do not end up delivering. In essence, they continue to produce good notes until they get paid and then they stop. Is there an online system I can use to withhold money until a job is completed I.E. the semester is over? My business partner is a developer and we are looking into using the paypal API, but we have a good chance of going viral and I have heard horror stories related to paypal and viral websites.

3. If instead I pool all of the money in a single account and disperse cash twice a semester in order to ensure product delivery, will I be considered an employer? How can I avoid being considered an employer by the IRS? There has to be a way I can be considered as a distribution platform.

Anyways, thanks for the help. If anyone ever has any questions about marketing don’t hesitate to ask.